BME's CEO eyes leading role in digital asset services

Javier Hernani, head of the Spanish stock exchange Bolsas y Mercados Españoles (BME), and head of securities services for the Swiss exchange SIX which bought BME last year, wants to position the two firms at the forefront of the digital asset space.

One of the key challenges in post-trade services for Hernani is the digital environment and analysing how to help clients navigate the digital asset space with safety, efficiency and using the right technology. Subsequently, the Group has unveiled a multitude of projects, including its investment in SIX's digital exchange called SDX. Whilst the exchange was unveiled in 2018 for launch in 2019, it has since been delayed. The exchange is still awaiting regulatory approval for SDX, which is based in Switzerland.

"The Group has a big investment into digital. We have an initiative called SDX and it is focused on the digitalisation of all processes. We are well advanced into trying to bring the benefits of safety and regulation into the efficiencies, speed and scalability of the digital world, which I think can bring a lot of advantages in the future going forward. For example, the fact that securities can be, to a large extent, dealt with in a blockchain environment as there is no need to move them around the world means that everything can happen in a very safe and controlled environment," Hernani told Global Investor.

After Swiss Group completed the acquisition of its Spanish counterpart in June last year, Hernani was named head of the securities services business in January 2021 and has been focusing on integrating the two businesses, telling Global Investor: "As newly head of securities services, I have been very concentrated on the integration of BME and SIX. This was a big opportunity to make the Spanish and Swiss infrastructures work together as they have different locations and clients, as well as a different reach and set of services."

Another key challenge that Hernani highlights is the severe restructuring that the banking sector is undergoing. He says the negative interest rate environment in the Eurozone places banks in a complex situation. Most of them are looking for improvements, savings and efficiencies in all areas, including the post-trade space.

To further strengthen its offering for clients and place itself as a leader in the digital asset space, BME is planning to issue a digital bond by the end of the year to early 2022. The identity of the issuer was not disclosed but the exchange told Global Investor that the issuer would be a Spanish company and that the firms taking part in the initiative would also be Spanish.

BME is also taking part in a blockchain-based facility that would initially focus on commercial loans and bonds, but going forward the exchange said it would look into how it can apply this technology in a multi-asset marketplace to provide liquidity and exposure for clients' different assets that can be tokenised. "We want to open the possibility for our customers to invest into different asset classes which may not be correlated to bonds and equities. However, regulation will have to allow for it because we are still in the early days of getting coverage from regulation for everything that is a digital asset or token," adds Hernani.

A second technological initiative for the firm will look to address tax-related services for clients. "Another very important process is our tax services in terms of dealing with withholding tax and tax claims. The digital world will also help us deploy this because it's putting together these two elements, the technology and the service," said Hernani.

The final challenge for post-trade services that Hernani notes is the importance placed on being an international player. He says that local service providers are limited in scope, which is not a good idea from a survival point of view.

SIX acquired in June last year 93.16% of the equity share capital of BME with 77,899,990 BME shares for €2.57 billion (£2.18 billion).

"The internationalisation of our Group is very important for us. We have very international banks as customers and we need to progress in giving them a first-class service in every part of the world. The Group is truly international and one of the main reasons for the merger between SIX and BME was the fact that SIX is a very international company," says Hernani. The Swiss exchange opened its custody business in the United States on July 21.